Determining the Closing Costs on your Home Purchase or Refinance

Posted by under Buying a Home

by CanEquity

Whether purchasing a condo, single family dwelling, apartment or vacation cottage, certain closing fees will apply. It is important that you factor these into your budget before making that offer and going through on your purchase.
While some of these costs are up-front, one time only fees, others will reoccur every month or so throughout the duration of your ownership.

    • Home Inspection: This fee ranges, but on average expect to pay about $350 for a professional home inspector to come out and inspect your prospective property. If the inspector finds damages that warrant other professionals taking a look, such as an electrician, plumber or foundations specialist, you may be able to negotiate with the seller to have them cover these costs or take them out of the purchase offer price, along with the funds these experts quote you on having damages or needed upgrades remedied.


    • Deposit: This is the amount you are giving to the seller, In Trust, with your offer to prove your purchase intent. A larger deposit generally indicates to the seller that you are in a serious position to buy, and could expedite their likelihood to consider your offer over others, though this is not always the case. The deposit is fully refundable should the conditions of your offer not be met. Should the offer be accepted, your deposit can be transferred on to your mortgage lender toward your down payment.


    • Home Appraisal: If you opt for a variable rate mortgage, are in the process of refinancing your mortgage, or your lender simply wants to ensure your offer is in line with the current market value of the property, a home appraisal will be requested. Often the lender will compensate this expense, or offer a subsidized fee to have it conducted.


    • Legal Fees: Legal fees are one of the heftier items involved in a home purchase. With a refinance or mortgage transfer, these fees may be covered by the lender. For purchases, be sure to ask around and seek a comfortable fee. In addition to their personal rate, the lawyer will need charge for disbursements and couriers. Disbursements are the funds owing on the house that pending its sale will need be compensated. At this time, the lawyer will also need confirm the sketch laid out on property title is still correct; that no structures have been added or land taken away. If a new mapping of the property need be rendered, this expense will fall to the seller.


    • Property Tax: If the seller has already paid a portion of the property taxes that account for the time you will be resident in the home, you will need reimburse them. For example, if the owner has paid tax up to May 2012 and you purchase to take possession January 1, 2012, you will need reimburse them for the months in which you are in possession of the property. In general, property tax information is distributed each May and owed each June, unless the owner opts to enroll in a Tax Installment Plan (TIP) wherein the property tax is paid monthly. Regardless, you will need be cognizant of when you will need pay this tax, which payment method you will select, and how much you will owe to the previous owner (if applicable) up front.


    • Transfer Tax: Depending on province or location, you may be required to pay a percentage of the purchase price in tax upon the transfer of property title to your name. Inquire with your real estate agent.


    • Registration Fee: This is the sum required by your provincial or territory government to register your title and mortgage.


    • Mortgage Insurance: All mortgages in Canada wherein less than 20 per cent is procured in down payment are required to be insured. Mortgage insurance does not protect the contents of your home, it protects the lender in the event you should default on your mortgage payments. This also allows them surety in lending high ratio mortgages at desirable rates. Mortgage insurance premiums will vary depending on your down payment and will be configured into your mortgage payments.


    • Homeowner’s Insurance: This is the insurance that covers your home and its contents in the event of fire, flood or other travesty. Most lenders will require that you have a fire rider protecting your home prior to releasing your financing. These premiums will vary depending on size, structure and security features in place in your home, and the duration of time for which you’ve been a homeowner. These monthly payments will most likely begin to be owed the first month in which you take possession.


    • Moving Costs:

If you are lucky enough to have friends and family with big trucks and a willingness to help you truck your belongings across the city, or from one to another, your moving costs might be low. But for most, moving will at least involve a Uhaul rental or a professional moving service. In addition, you will want to budget for supplies and instant repairs that will need be made upon move in date.
Though these costs may seem daunting, so long as you budget accordingly you shouldn’t have any surprises. Your real estate agent and mortgage broker will be able to provide quotes on each of these items for you, let you know which are applicable, and alert you to what will be covered. Thus, again, the importance of hiring reputable professionals to assist you in your home buying process.



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